UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
______________________________ ) QATAR NATIONAL BANK, ) ) Plaintiff, ) ) v. ) Civil Action No. 06-1307 (GK) ) WINMAR, INC., ) d/b/a WINMAR CONSTRUCTION, ) ) Defendant and Third- ) Party Plaintiff. ) ______________________________) ) WINMAR, INC., ) d/b/a WINMAR CONSTRUCTION, ) ) Third-Party Plaintiff ) and Counterclaim ) Defendant, ) ) v. ) ) AL-JAZEERA INTERNATIONAL, ) ) Third-Party Defendant ) and Counterclaim ) Plaintiff. ) ______________________________)
MEMORANDUM OPINION
Plaintiff Qatar National Bank (“QNB”) brings this action
against Defendant and Third Party Plaintiff Winmar, Inc.
(“Winmar”). QNB alleges that Winmar had no right to retain funds
that were mistakenly transferred to it (Count I), and that Winmar
was unjustly enriched as a result of the mistaken transfer (Count
II). This matter is now before the Court on QNB’s Motion for Summary Judgment [Dkt. No. 35]. Upon consideration of the Motion,
Opposition, Reply, Surreply, the entire record herein, and for the
reasons set forth below, QNB’s Motion for Summary Judgment is
granted.
I. Background1
A. Plaintiff’s Statement of Material Facts Is Admitted
Defendant submitted a Statement of Material Facts as to Which
There is No Genuine Dispute, but failed to submit a “separate
concise statement of genuine issues setting forth all material
facts as to which it is contended there exists a genuine issue
necessary to be litigated,” as required by Local Rule 7(h). See
LCvR 7(h).
According to Local Rule 7(h), “the court may assume that facts
identified by the moving party in its statement of material facts
are admitted, unless such a fact is controverted in the statement
of genuine issues filed in opposition to the motion.” Id. As our
Court of Appeals has held, “[i]f the party opposing the motion
fails to comply with [Local Rule 7(h)], then the district court is
under no obligation to sift through the record and should [i]nstead
. . . deem as admitted the moving party’s facts that are
1 Unless otherwise noted, the facts set forth herein are drawn from Plaintiff’s Statement of Undisputed Material Facts submitted pursuant to Local Civil Rule 7(h). As noted infra, Defendant failed to comply with Local Rule 7(h) because it did not submit a response to QNB’s Statement of Material Facts as to Which There Is No Genuine Dispute.
2 uncontroverted by the nonmoving party’s Rule [7(h)] statement.”
Secs. & Exch. Comm’n v. Banner Fund Int’l, 211 F.3d 602, 616 (D.C.
Cir. 2000) (internal citations and quotation marks omitted); see
also Jackson v. Finnegan, Henderson, Farabow, Garrett & Dunner, 101
F.3d 145, 151 (D.C. Cir. 1996) (the local rules place “the burden
on the parties and their counsel, who are most familiar with the
litigation and the record, to crystallize for the district court
the material facts and relevant portions of the record”).
Here, Defendant failed to comply with Rule 7(h) because it did
not file a statement of disputed facts. Instead, it submitted only
its own Statement of Material Facts as to Which There Is No Genuine
Dispute. Therefore QNB’s facts are admitted because they have not
been controverted.
B. QNB’s Duplicate Payment and Refund Request
On November 23, 2005,2 Winmar and Third Party Defendant Al-
Jazeera entered into a contract for the renovation of Al-Jazeera’s
office at 1627 K Street N.W. in Washington, D.C. Under the terms
of the contract, Al-Jazeera agreed to submit payments by wiring
funds to an account at Citibank Federal Savings Bank in Washington
(“Citibank”). On October 20, 2005, Winmar and Janson Design Group
(“Janson”), the architect on the project, certified that Winmar was
2 Both parties agree on this date, even though it would appear from the following chronology that the correct date is 2004, not 2005.
3 due an initial deposit of $645,164, plus a first payment of
$474,677.
On October 27, 2005, Al-Jazeera wired an initial deposit of
$645,161 to the Citibank account. On December 7, 2005, Janson
certified that Winmar was owed three additional payments of
$115,872, $775,913, and $471,678, which totaled $1,363,463.
On December 8, 2005, Al-Jazeera faxed a payment order to QNB,
requesting that QNB wire $474,677 to the Citibank account. On
December 12, 2005, QNB used the FedWire system to wire the funds to
JPMorgan Chase Bank, its correspondent bank, which in turn wired
the funds to the Citibank account.
On December 22, 2005, Christopher Condon, Winmar’s Vice
President, sent Al-Jazeera a letter reiterating that it owed Winmar
an additional $1,363,463.
On January 4, 2006, Winmar informed Al-Jazeera that it planned
to suspend its performance of the contract unless it received a
payment of $1,363,463.
On January 5 and January 6, 2006, Winmar received two letters
from Janson. In the letters, Janson stated that it had erred in
certifying the $1,363,463 amount, and it requested that Winmar
provide documentation to support its claim that it was owed
$1,363,463. On January 11, 2006, Al-Jazeera terminated the
contract for convenience.
4 On January 18, 2006, Winmar submitted a revised certification,
claiming Al-Jazeera owed it $653,449 as a final payment under the
contract. On January 19, 2006, Janson rejected this certification.
On the same date, Al-Jazeera wrote a letter to Winmar, stating that
Winmar was not entitled to any additional payments until it
provided supporting documentation. On January 23, 2006, Winmar
submitted a revised certification in which it claimed that Al-
Jazeera owed it $355,297.
On January 30, 2006, Al-Jazeera faxed a second copy of the
December 2005 payment order to QNB. Pl.’s Mot., Ex. 4. At the top
of the fax, there was a handwritten note stating that Al-Jazeera
had not “received any . . . transfer confirmation for this” and
requesting QNB to “please send the Confirmation.” See id.
QNB mistakenly understood this fax to constitute a second
payment order, rather than a request for confirmation that the
first payment order had been processed. On January 30, 2006, QNB
wired a duplicate payment of $474,677 to the Citibank account. The
funds arrived in the Citibank account on January 31, 2006. Al-
Jazeera did not authorize this second payment.3
3 In its submissions, Winmar repeatedly refers to this mistake as an “alleged error.” See, e.g., Def.’s Statement of Material Facts as to Which There Is No Genuine Dispute ¶ 17. In the Surreply, it argues that the payment was not a mistake, claiming that the January 30, 2006 request for confirmation “may well not have been a confirmation request, but a further direction to affect payment to Winmar.” Def.’s Corrected Surreply at 4. The sole support for this argument is that Al-Jazeera had already sent (continued...)
5 After it had wired the funds to the Citibank account, QNB
recognized that it had erred in sending the duplicate payment. On
February 2, 2006, it wired the following instructions to JPMorgan
Chase Bank:
URGENT . . . URGENT . . . THE ABOVE PAYMENT HAS BEEN WRONGLY DUPLICATED FROM OUR SIDE WITH REF 6202790001932 DATED 12.12.2005 WITH THE SAME AMOUNT AND THE SAME BENEFICIARY DETAILS KINDLY TREAT THE PAYMENT ORDER . . . DATED 30.01.2006 AS NULL AND VOID AND REFUND THE AMOUNT TO OUR ACCOUNT WITH YOU UNDER URGENT SWIFT ADVISE TO US. SORRY FOR THE INCONVENIENCE CAUSED
JPMorgan Chase responded on the same day, stating that it had
already processed the payment and that it would contact Citibank to
request the refund.
On February 3, 2006, Al-Jazeera notified Winmar that it owed
nothing on the contract and that in fact, it was owed $200,000 from
Winmar.
3 (...continued) Winmar a confirmation letter on December 19, 2005. See id. (“If [Al-Jazeera] already had confirmation of the December payment, it does not stand to reason that they would seek re-confirmation a month later.”). In contrast, QNB provides an actual copy of the January 30, 2006 fax. See Pl.’s Mot., Ex. 4. The handwritten note on the fax clearly indicates that it was intended to be a request for confirmation and not a second payment order. Thus, QNB’s assertion that the second transfer was a mistake may be admitted because it has not been adequately controverted. See Hussain v. Nicholson, 435 F.3d 359, 365 (D.C. Cir. 2006) (“In deciding whether there is a genuine issue of material fact, the court must assume the truth of all statements proffered by the non-movant except for conclusory allegations lacking any factual basis in the record.”) (emphasis in original).
6 On the same date, Winmar’s President informed a subcontractor
that it had been notified by Al-Jazeera about the termination of
the contract, that it had submitted a “final requisition of
payment,” that it had not yet received the payment, and that it had
been “advised” that Al-Jazeera denied the requisition for payment.
On February 8, 2006, JPMorgan Chase informed QNB that it had
contacted Citibank about receiving a refund from Winmar, but that
Winmar had refused to refund the money. QNB did not receive any
additional response from Winmar regarding its February 2, 2006
refund request.
On February 24, 2006, Al-Jazeera submitted a formal claim to
Janson in which it stated that the $474,677 payment was an
overpayment.
On March 9, 2006, Winmar responded by letter. It stated that
it was “unaware until your [February 24, 2006 claim] was received
that any wire had been accomplished on January 31st [2006].” Pl.’s
Mot., Ex. 6. It acknowledged that it had received a payment of
$474,677, and stated that the “excess over the amount last
requisitioned by Winmar is reflected in the enclosed check for
$119,380.” Id.
On March 12, 2006, Al-Jazeera informed QNB by letter that QNB
was responsible for the mistaken transfer. It threatened to
initiate legal proceedings if QNB did not refund the money. On
March 20, 2006, QNB refunded $474,677 to Al-Jazeera.
7 On March 28, 2006, Winmar wrote a letter to Janson in which it
stated that the “February 24, 2006 letter was the first notice
Winmar received that [Al-Jazeera] had wired money into Winmar’s
account. Prior to February 24, 2006, Winmar received no request
from [Al-Jazeera] to return the wired funds.” Pl.’s Statement of
Material Facts ¶ 24.
On April 12, 2006, QNB sent a second refund request to Winmar.
QNB received no response.
QNB filed a Complaint against Winmar in this Court on July 24,
2006. QNB alleged that Winmar has no right to retain money it
received by mistake (Count I) and that Winmar has been unjustly
enriched as a result of retaining the money (Count II). On
November 9, 2006, Winmar filed a Third Party Complaint against Al-
Jazeera [Dkt. No. 19]. On February 1, 2007, Al-Jazeera filed a
Counterclaim against Winmar [Dkt. No. 20]. On June 16, 2008, QNB
filed a Motion for Summary Judgment [Dkt. No. 35]. On July 7,
2008, Winmar filed an Opposition [Dkt. No. 37], on July 21, 2008,
QNB filed a Reply [Dkt. No. 38], and on August 4, 2008, Winmar
filed a Surreply [Dkt. No. 40].
II. Standard of Review
Summary judgment may be granted “only if” the pleadings, the
discovery and disclosure materials on file, and any affidavits show
that there is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law. See Fed.
8 R. Civ. P. 56(c), as amended December 1, 2007; Arrington v. United
States, 473 F.3d 329, 333 (D.C. Cir. 2006). In other words, the
moving party must satisfy two requirements: first, demonstrate that
there is no “genuine” factual dispute and, second, that if there is
it is “material” to the case. “A dispute over a material fact is
‘genuine’ if ‘the evidence is such that a reasonable jury could
return a verdict for the non-moving party.’” Arrington, (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A fact
is “material” if it might affect the outcome of the case under the
substantive governing law. Liberty Lobby, 477 U.S. at 248.
In its most recent discussion of summary judgment, in Scott v.
Harris, 550 U.S. 372, 380 (2007), the Supreme Court said,
[a]s we have emphasized, “[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine issue for trial.’” Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 . . . (1986) (footnote omitted). “[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Liberty Lobby, 477 U.S. at 247- 48 (emphasis in original).
However, the Supreme Court has also consistently emphasized
that “at the summary judgment stage, the judge’s function is not
. . . to weigh the evidence and determine the truth of the matter,
but to determine whether there is a genuine issue for trial.”
Liberty Lobby, 477 U.S. at 248, 249. In both Liberty Lobby and
9 Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150
(2000), the Supreme Court cautioned that “[c]redibility
determinations, the weighing of the evidence, and the drawing of
legitimate inferences from the facts, are jury functions, not those
of a judge” deciding a motion for summary judgment. Liberty Lobby,
477 U.S. at 255. “To survive a motion for summary judgment, the
party bearing the burden of proof at trial . . . must provide
evidence showing that there is a triable issue as to an element
essential to that party’s claim. See Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986).” Arrington, 473 F.3d at 335.
III. Analysis
A. QNB’s Motion for Summary Judgment May Be Decided Before the Dispute Between Winmar and Al-Jazeera Is Resolved
Winmar argues that granting summary judgment for QNB would be
“premature” because QNB’s claim is “entirely derivative of the core
dispute” between Winmar and Al-Jazeera and because there are
“numerous issues of material fact” remaining in that dispute.
Def.’s Corrected Surreply at 2. Winmar also alleges that summary
judgment would be “improper” because discovery is “ongoing” in the
dispute between Winmar and Al-Jazeera. Def.’s Opp’n at 2.
Winmar has cited to no case holding that a court may not
decide a plaintiff’s motion for summary judgment when a case
includes a third party and unresolved claims remain between the
defendant/third party plaintiff (here Defendant Winmar) and the
third party defendant (here Al-Jazeera). In fact, courts have
10 granted a plaintiff’s motion for summary judgment even when a third
party remains in the case. See, e.g., Jordan v. Can You Imagine,
Inc., 485 F. Supp. 2d 493 (S.D.N.Y. 2007).
In addition, the Court’s Scheduling Order in this case clearly
established two different discovery schedules and two different
dispositive motion schedules: one for the dispute between QNB and
Winmar and one for the dispute between Winmar and Al-Jazeera [Dkt.
No. 34]. For example, the Corrected Scheduling Order set June 16,
2008 as the deadline for dispositive motions on QNB’s claims
against Winmar and October 8, 2008 as the deadline for “all other”
dispositive motions. Corrected Scheduling Order (Apr. 2, 2008).
These separate schedules show that Winmar was on notice that the
issues between the three parties would not be resolved at the same
time.
It is telling that in the Third-Party Complaint against Al-
Jazeera, Winmar acknowledges that Al-Jazeera’s liability to Winmar
derives from Winmar’s liability to QNB. See Third-Party Complaint
Against Al-Jazeera International (Nov. 9, 2006) [Dkt. No. 19]
(“Third-party defendant Al-Jazeera is liable to defendant and
third-party plaintiff Winmar for all or part of the plaintiff’s
claim against the defendant . . . .”). Thus, as Winmar itself
acknowledges, the claim that is derivative is Winmar’s Third-Party
Complaint, not QNB’s Complaint against Winmar.
11 Finally, Winmar argues, at p. 5 of its Opposition, that a
summary judgment decision in favor of QNB “would be partially
determinative of the claims between Winmar and Al-Jazeera.” That
is simply not true. Nor is it true, as Winmar argues at p. 6, that
if the Court rules that QNB is entitled to summary judgment and
restitution, the Court will have “made a determination that Winmar
is not entitled to payment from Al-Jazeera in any amount, or in an
amount less than $474,677.” As Judge Robertson of this Court
pointed out in Credit Lyonnais-New York v. Washington Strategic
Consulting Group, 886 F. Supp. 92, 93 (D.D.C. 1995), “the question
whether [Al-Jazeera] owed the money . . . is not material” to QNB’s
claim for restitution.
For these reasons, it is appropriate to resolve QNB’s Motion
for Summary Judgment prior to resolving the dispute between Winmar
and Al-Jazeera.4
B. Winmar Has Not Shown that Requiring It to Refund the Mistaken Payment Would Be Inequitable
Transfers of funds which use the FedWire system must comply
with the provisions set forth in the Code of Federal Regulations.
See 12 C.F.R. § 210.25 (2009). According to these Regulations,
4 Winmar repeatedly tries to suggest that there are material facts in dispute, without giving any specifics. It is noteworthy that Winmar has failed to file any Rule 56(f) motion which requires the opponent of such a motion to show by affidavit the specific reasons why it is necessary to allow further discovery in order to present sufficient facts it deems essential to justify its opposition to the motion.
12 also known as “Regulation J,” a bank that mistakenly issues a
duplicate order is “entitled to recover from the beneficiary of the
erroneous order the excess payment received to the extent allowed
by the law governing mistake and restitution.” Id., Appendix B to
Subpart B, Section 4A-303; Pl.’s Mot. at 8-9; Def.’s Opp’n at 7.5
In the District of Columbia, the law of mistake provides that
“one who pays money to another under an honest mistake of fact may,
in the absence of an equitable defense, recover the money so paid.”
Ass’n of Am. R.Rs. v. Connerton, 723 A.2d 858, 862 (D.C. 1999)
(quoting Lanston v. Am. Sec. & Trust Co., 32 A.2d 482, 483 (D.C.
1943)). There is “no exception” to this rule. Id. (quoting
Prowinsky v. Second Nat’l Bank, 49 App. D.C. 363, 364 (1920)).
When one party mistakenly transfers money to another, restitution
is equitable when it would “put the parties in the same position
that they would have been in had the error in transferring the
funds not occurred.” In re Calumet Farm, Inc., 398 F.3d 555, 562
(6th Cir. 2005).
Restitution is also required when one party has been unjustly
enriched. Rapaport v. Dep’t of Treasury, Office of Thrift
Supervision, 59 F.3d 212, 217 (D.C. Cir. 1995) (“[T]he fundamental
characteristic of unjust enrichment is that the defendant has been
unjustly enriched by receiving something that properly belongs to
5 This section of the Code of Federal Regulations is identical to U.C.C. § 4A-303, which was enacted as § 28:4A-303 of the D.C. Code.
13 the plaintiff, thereby forcing restoration to the plaintiff.”)
(internal citations and punctuation omitted); Standard Ins. v.
Burch, 540 F. Supp. 2d 98, 104 (D.D.C. 2008) (“In such a case [of
unjust enrichment], the recipient of the benefit has a duty to make
restitution to the other person.”); Jordan Keys & Jessamy, LLP, v.
St. Paul Fire & Marine Ins. Co., 870 A.2d 58, 63 (D.C. 2005)
(holding that the “modern law of unjust enrichment and restitution”
requires restitution when retention of a benefit would be unjust).
In the District of Columbia, a defendant has been unjustly
enriched and must pay restitution if “(1) the plaintiff confers a
benefit on the defendant; (2) the defendant retains the benefit,
and (3) under the circumstances, the defendant’s retention of the
benefit is unjust.” Armenian Assembly of Am., Inc. v. Cafesjian,
597 F. Supp. 2d 128, 134 (D.D.C. 2009).
To succeed on a claim for unjust enrichment, the plaintiff
need not show that the defendant is at fault, so long as he
demonstrates that in spite of the defendant’s “innocence in
receiving the benefit,” his retention of that benefit would be
unjust. Burch, 540 F. Supp. 2d at 105 (internal citations and
quotation marks omitted). When unjust enrichment occurs as the
result of a mistake of fact, the defendant bears the burden of
proving that restitution would be inequitable. Connerton, 723 A.2d
at 862 (“If there is any question, in a case of money paid by the
plaintiff under a mistake of fact, whether it would be inequitable
14 to require the defendant to refund, the burden of proving the fact
rests upon him.”) (quoting Hibbs v. Beall, 41 App. D.C. 592, 598
(D.C. 1914)) (internal quotations marks and punctuation omitted).
It is not disputed that QNB’s duplicate payment of $474,677
resulted from an honest mistake of fact,6 that it conferred a
benefit on Winmar, or that Winmar retained this benefit.
Therefore, the only issue in dispute is whether Winmar’s retention
of this benefit is unjust. As the beneficiary of money paid as the
result of a mistake of fact, Winmar bears the burden of proving
that restitution would be unjust.
Winmar argues that it is entitled to retain the mistakenly-
transferred funds in accordance with the discharge-for-value
defense. Def.’s Opp’n at 9. According to Winmar, summary judgment
is not appropriate because factual disputes remain as to whether
Winmar rightfully retained the mistaken payment in order to
discharge a portion of the debt owed it by Al-Jazeera. Id. at 5.
The discharge-for-value defense is defined in the official
comment to Section 4A-303 of the Uniform Commercial Code (“UCC”).
The defense has been adopted in the District of Columbia as Section
28:4A-303 of the D.C. Code. See In re Calumet Farm, Inc., 398 F.3d
at 559 (stating that U.C.C. § 4A-303(a) “incorporates the
discharge-for-value defense”); In re Calumet Farm, Inc., 1997 WL
253278, at *4 (6th Cir. 1997) (“[A] wire transfer effected via
6 See supra note 2.
15 Fedwire is covered by the provisions of U.C.C. § 4A-303(a) and its
official commentary, and is therefore subject to the
discharge-for-value rule.”). In the Code of Federal Regulations,
the text of Section 4A-3037 is construed in light of the discharge-
for-value defense. See 12 C.F.R. § 210.25, Appendix A to Subpart
B (“The official comments to Article 4A are not incorporated in
subpart B of this part or this Commentary to subpart B of this
part, but the official comments may be useful in interpreting
Article 4A.”).
In describing the discharge-for-value defense, Section 4A-303
states that a bank that makes a mistaken payment to a beneficiary
would “normally have a right to recover the overpayment” from that
beneficiary. D.C. Code § 28:4A-303. However, it goes on to state
that “in unusual cases the law of restitution might allow
Beneficiary to keep all or part of the overpayment.” Id.8 The
comment provides one example of an unusual case: if the bank’s
client “owed $2,000,000 to Beneficiary and Beneficiary received the
7 Section 4A-303 is located in Appendix B to Subpart B of 12 C.F.R. § 210.25. 8 The comment adds one clarifying statement about the rights of the bank that made the error vis-a-vis the rights of the beneficiary: “[i]n this case Originator’s Bank has paid an obligation of Originator and under the law of restitution, . . . Originator’s Bank would be subrogated to Beneficiary’s rights against Originator on the obligation paid by Originator’s Bank.” D.C. Code § 28:4A-303.
16 extra $1,000,000 in good faith in discharge of the debt,
Beneficiary may be allowed9 to keep it.” Id.
The Restatement of Restitution provides the following
definition of the discharge-for-value defense:
A creditor of another or one having a lien on another’s property who has received from a third person any benefit in discharge of the debt or lien, is under no duty to make restitution therefor, although the discharge was given by mistake of the transferor as to his interests or duties, if the transferee made no misrepresentation and did not have notice of the transferor’s mistake.
Restatement (First) of Restitution § 14(1) (1937).
Thus, it is clear that the discharge-for-value defense allows
a transferee to keep mistakenly transferred funds only when it has
received no notice of the mistake and has made no
misrepresentations. In re Calumet, 398 F.3d at 559. However, as
the court pointed out in In re Calumet, few authorities have
“specif[ied] the point in time by which notice of mistake must be
received.” Id. Previous cases addressing the discharge-for-value
defense examined “whether the discharge-for-value rule applies in
this setting, not how it applies.” Id. (discussing Gen. Elec.
Capital Corp. v. Cent. Bank, 49 F.3d 280 (7th Cir. 1995) and Banque
Worms v. BankAmerica Int’l, 570 N.E.2d 189 (N.Y. 1991)) (emphasis
9 “[T]he ‘usual presumption is that “may” confers discretion, while “shall” imposes an obligation to act.’” Consumer Fed’n of Am. v. Dep’t of Health and Human Servs., 906 F. Supp. 657, 664-65 (D.D.C. 1995) (quoting Int’l Union, UAW v. Dole, 919 F.2d 753, 756 (D.C. Cir. 1990)).
17 in original). For this reason, those cases do not offer
substantial guidance in determining when notice must be received.
In re Calumet does provide a detailed analysis of this issue.
See Def.’s Opp’n at 10 (“The only authority which addresses the
‘timing issue’ is derived from . . . In re Calumet”). It rejected
two possible interpretations of the notice rule: (1) that notice
must occur before “a payment order . . . is accepted by the
beneficiary’s bank” and (2) that notice must be actual, rather than
constructive. 398 F.3d at 560.
Instead, the court reached two key conclusions. First, it
reasoned that the “most desirable option” is to apply the
discharge-for-value defense “unless the beneficiary receives notice
of a mistake before the beneficiary of the transfer credits the
debtor’s account.” Id. This approach is desirable because it is
“consistent with one of the underlying principles of the discharge-
for-value rule; namely, that the creditor has given value for the
mistaken payment.” Id. Second, it reasoned that “[a]ny sensible
application of the discharge-for-value rule . . . must account for
constructive as well as actual notice of a mistake.” Id.10
10 This approach is consistent not only with the language in the Restatement but also with the official comment to § 4A-303(a). The official comment states that the discharge-for-value defense applies if a mistaken payment is received “in good faith in discharge of the debt.” D.C. Code § 28:4A-303. It is clear that when a beneficiary receives actual or constructive notice that funds were mistakenly transferred before he credits a debtor’s account, he has not received the payment “in good faith in (continued...)
18 In the present case, Winmar has provided no reason to reject
the Sixth Circuit’s conclusions. Accordingly, the discharge-for-
value rule applies only if Winmar did not have actual or
constructive notice before Winmar credited Al-Jazeera’s account.
Here, QNB wired the second payment to the Citibank account on
January 30, 2006, and the funds arrived in the account on the next
day. On February 24, 2006, Al-Jazeera wrote a letter to Janson in
which it stated that the $474,677 payment was a “mistake.” Pl.’s
Mot., Ex. 6. In Winmar’s response on March 9, 2006, it
acknowledged that it had been “unaware” prior to the receipt of
this letter that “any wire had been accomplished on January 31st
[2006].” Id. Winmar does not dispute that it did not become aware
of the mistake until February 24, 2006, nor does it present any
evidence that it credited Al-Jazeera’s account prior to that date.
In fact, it is clear that Winmar could not have credited Al-
Jazeera’s account prior to February 24, 2006 if it did not even
know of the transfer until that date. Therefore Winmar’s March 9,
2006 letter provides undisputed evidence that Winmar received
actual notice of QNB’s mistake before it credited Al-Jazeera’s
account.11
10 (...continued) discharge of the debt.” 11 In its Opposition, Winmar argues that “for all practical intents and purposes, [Al-Jazeera’s] account, such as it was, was immediately credited upon receipt of the funds.” Def.’s Opp’n at (continued...)
19 Even if Winmar did not have actual notice that the payment was
a mistake, it had constructive notice of the error. Less than two
months after it received a payment of $474,677, it received a
second payment of the exact same amount. That second payment
substantially exceeded the $355,297 that Winmar had claimed it was
owed in its January 23, 2006 certification. These two undisputed
facts show that Winmar had constructive notice that the second
payment had to have been a mistake. See In re Calumet, 398 F.3d at
560 (“[C]onstructive notice of a mistake may also occur simply as
a result of the size of the transfer.”). Winmar received this
constructive notice at the moment the payment arrived in its
account, which occurred prior to February 24, 2006. As discussed
supra, Winmar could not have credited Al-Jazeera’s account prior to
February 24, 2006. Therefore, it had constructive notice prior to
crediting Al-Jazeera’s account. For these reasons, the discharge-
for-value defense does not apply to QNB’s mistaken payment to
In Credit Lyonnais, a case remarkably similar to the present
one, the plaintiff bank received a request to confirm a previous
payment made four days earlier of $171,821.30. Instead of
responding to the confirmation request, the plaintiff bank
11 (...continued) 11. Winmar offers no evidence to support this argument or to rebut QNB’s argument that it could not have credited Al-Jazeera’s account before February 24, 2006. Therefore Winmar fails to create a genuine dispute of material fact on this issue.
20 mistakenly -- as in this case -- made a second wire transfer of the
same amount to its affiliate. In that case, it took nearly six
months for the plaintiff bank to discover its mistake and demand
return of the funds. Despite the substantial passage of time,
Judge Robertson ruled for the plaintiff bank on the basis of
“settled law: where one person receives money that in equity and
good conscience belongs to another, action will lie for ‘money had
and received.’” Credit Lyonnais, 886 F. Supp. at 93 (citations
omitted).
Accordingly, Winmar has not shown that it would be inequitable
to require it to refund QNB’s mistaken payment.12 See D.C. Code
§ 28:4A-303 (stating that in the case of a mistaken payment, a bank
would “normally have a right to recover the overpayment” from the
beneficiary); In re Calumet, 393 F.3d at 561 (“It is difficult to
see what is unfair about requiring a bank to return money if it was
notified of the mistaken payment before it gave value for the
payment.”) (internal quotation marks and citations omitted).
12 Winmar argues that the present case is similar to Chase Manhattan Bank v. Burden, 489 A.2d 494 (D.C. 1985), in which the court held that the defendant was not unjustly enriched, and he was not required to pay restitution. However, as QNB correctly states, Burden is distinguishable because the debtor authorized the payment and because Burden spent the money “[s]everal months]” before he received notice of the mistake. Id. at 495-96. In addition, Burden had no reason to know that the money was transferred in error.
21 IV. Conclusion
For the reasons set forth above, QNB’s Motion for Summary
Judgment [Dkt. No. 35] is granted. An Order shall accompany this
Memorandum Opinion.
/s/ September 3, 2009 Gladys Kessler United States District Judge
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